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Securing Sensitive Information: Empowering Financial Services with Blockchain Technology

Sensitive data protection has become a major buzzword in the financial series industry. Financial privacy and data security solutions are modern-day necessities for banks and other entities operating in the industry, considering disastrous data breaches and Cybersecurity threats that have rocked the segment in the last few years. 

Blockchain technology has also become a major tool for empowering financial services players to safeguard sensitive information. It is a transparent, decentralised and secure framework which will ultimately transform the manner in which financial transactions are executed.

It will lead to lower costs, higher security, and improved efficiency levels overall. Here are a few aspects that you should certainly take into account. 

Blockchain for identity verification

Blockchain technology has wide-ranging applications for identity verification purposes. Here are some points in this regard:

• Self-sovereign identities are those digital identities which are owned and controlled by their users. 
• SSI will preserve the individual rights to disclose various identity aspects throughout domains and context-based settings. 
• People will have full charge over their data usage and not the companies asking them to fill forms online. 
• These identities will be locally stored on the smartphone of the user or distributed throughout the blockchain network. 

• The system makes use of DIDs (decentralised identifiers) for facilitating decentralised and verifiable digital identities. 
• Immutable reputation scoring systems may also be used by financial institutions for vetting their users with blockchain identity management. 
• Private keys will help verify cryptocurrency and other transactions, while Daemon wallets can automate transaction request authorisation from and to blockchains. 
• ID-based subscriptions and payments can be another major trend in the future. One may eventually access content without signing up in some cases

Along with identity verification and management, blockchain technology also has huge potential in terms of cross-border payments. Here is a closer look at the same below.

Blockchain for supply chain finance:

Blockchain is also enhancing supply chain finance (SCF) methods. It is lowering the transaction times and streamlining the processes. Here are some other benefits that should be kept in mind:

• Blockchain is a distributed asset database that may be shared throughout networks, locations, and sites. 
• Supply chain entities can connect through blockchain platforms and optimise credit ecosystems. They can also transfer core corporate credit easily, thereby streamlining transactions. 
• Core enterprise credit can be split and transferred on blockchain platforms, helping more SMEs to get inclusive and equal financial services throughout the supply chain. 
• Supply chain finance systems can be automated to save money and time, while boosting operational efficiencies. It also boosts overall continuity and trust across partners for transactions.

• Copies of the same ledgers showing information are distributed throughout participants who all have network access. The unalterable nature of blockchains combats any misinformation. This enhances overall credibility and trustworthiness. 
• The immutable chain of transactions is what builds greater confidence and trust among all parties. It may be used by companies for verifying invoice receipts and payment approvals. 
• Blockchain technology levels the entire ecosystem, enabling higher access to each all types of banking funds. The decentralised framework makes it possible for providers to finance any kind of invoice, while each transaction is recorded on the ledgers. Finance providers do not have options to deny financing access to smaller players as a result. 
• Blockchain may also open up the space for many other stakeholders including individual investors and corporate entities in the future aside from financial institutions. 
• Blockchain platforms can maintain data about expenditure and movements on a real-time basis while streamlining all resources accordingly.

The trading and payments landscape may be considerably redefined by blockchain technology in the future. The best part is that it also enables sensitive data protection while streamlining operations alongside. 

Blockchain for cross-border payments:

Cross-border payments are vital for businesses, individuals, institutions, traders, and other global organisations. The usage of blockchain is what makes the entire procedure hassle-free.

• Blockchain cross-border payments happen between two parties present in different nations. They are enabled with blockchain technology, doing away with the complex network of intermediaries, longer processing times, and high fees. 
• Blockchain payments will enable swifter P2P (person to person) and B2B (business to business) transactions. 
• Conventional bank transfers are linked through the underlying banking network. It may include clearing houses, commercial banks, credit unions, and other service providers. 

• Smart contracts, alternatively, enforce the transaction based on predefined conditions and regulations. This leads to instant transactions with complete transparency and zero intermediaries. 
• Removal of intermediaries enables the reduction of transaction costs considerably while transactions can happen in a few seconds round-the-clock. 
• Immutable ledger technology helps automated record-keeping and maintenance. All data and transactions are automatically recorded and time-stamped. 
• Data hashing, public-private cryptography, fraud detection, and multi-party authentication ensure enhanced security for these transactions.

Hence, individuals and companies are leaning more towards blockchain for cross-border payments in recent times. This trend should only gain traction in the near future. Let us now look at the advantages of blockchain technology for supply chain finance.

FAQs

1.What are the key advantages of using blockchain for securing sensitive data in financial services?

Blockchain works on the premise of an immutable, decentralised, and shared ledger. It enhances security, trust, and transparency along with the traceability of all information and transactions throughout the network. Members can only access the ledger with permission, while nothing can be modified or altered.

2. Are there any specific use cases or success stories of blockchain securing sensitive financial data?

There are several use cases that have been observed in recent times. Banks and other financial services players have been using blockchain technology to automatically time-stamp and store transaction records. It is also enabling easier tracking of data which is stored in immutable and unalterable ledgers. Hence, sensitive data is being stored and tracked in real-time without any hassles.

3. What measures are in place to protect sensitive financial information from insider threats in blockchain-based systems?

Some of the key measures include cryptography, consensus, and decentralisation. Additionally, the blocks are linked and structured in a manner where tampering is near-impossible. The system uses the principle of trust that is consensus-based to prevent the insertion of changed/false records. Advanced encryption also enables enhanced data security in this case.

4. How does blockchain empower financial services to comply with data privacy regulations?

Blockchain technology helps financial services players to adhere to data privacy regulations better. The immutable, consent-based, and decentralised ledger means that users are in control of their own data. They can only share it after providing consent. Participants collectively authenticate and maintain data with full access control via smart contracts. The whole system ensures higher transparency and authentication. Blockchain helps intellectual property owners to register trademarks, authenticate their ownership rights, combat counterfeiting, lease IPs with smart contracts, and also take care of their privacy. Blockchain can also facilitate autonomous and secure digital identities.